EconomyFinancialHow to strengthen an SME to avoid more bankruptcies?

How to strengthen an SME to avoid more bankruptcies?

By: Daniel Marcos, CEO Growth Institute and business advisor.

This week we learned an alarming figure for the business environment: 1 million 10,857 companies closed their doors (INEGI). More than a figure, as a business leader who has gone through bankruptcy, this is painful and worrying in many ways as they mean the loss of millions of dreams, it means the loss of economic units that employed millions of people and helped the commercial chain , and therefore, to the economy.

A large part of the bankruptcies were in small and medium-sized companies, since these, due to their growth stage, have greater difficulties in accessing sources of savings, professional support networks, credits and issuing debt in capital markets.

Although it is terrible news that affects everyone, we need to act fast as we cannot allow more companies to disappear. 3.8 million still survive who need advice and support to achieve operational efficiency and adaptability to market conditions that, all indicators show us, is not at all favorable.

The main reasons why SMEs fail have to do with internal problems such as: poor administration, lack of technical knowledge, problems with the work team, lack of financing and lack of knowledge of the market.

What I have found is that companies with operational efficiency that scale focus on strengthening 4 Decisions based on the Scaling Up business methodology:

1. Team

You need the best in your company to scale. Your team is the group of people who will anchor or enhance your growth. To achieve this, start from hiring: do you have effective recruiting systems and processes that allow you to identify the best or do you hire the first candidate who arrives at your door?

The losses of time and money for a poorly hired employee are gigantic. In 2002, when I was working in Patagon’s management team, we needed a banking director to obtain the license that accredited us as a bank. The urgency made us hire a director who had all the technical capabilities of traditional banking but not digital banking. His inexperience led us to bad decisions that cost millions. This not only happens in managerial positions, any position can mean a loss of resources for the company.

If you already have a great team, then take care of them in their mental health -an topic abandoned in many companies and so necessary in the situation we are going through-, help them to be the best with the correct tools and with good leadership that gives them clarity to operate, focus on your goals and find solutions to big problems.

2. Strategy

The strategy should answer in the simplest way the question: where are we going and what should we do to get there? An important part of business leaders believe that the strategy must be something very complex for it to work, the reality is that the simpler and easier to execute strategy, it will give you greater results.

If you don’t have a strategy that everyone in your organization can understand and execute, then no one will know where they are going and what they need to do to get there. You need to clearly communicate your vision and your action-oriented strategic plan to align your entire team. A good strategy is reflected in your income and your growth.

The Scaling Up methodology has a powerful and effective tool called a Strategic Plan on a Page where, literally on one page, you can develop your plan with priorities, objectives, goals, indicators and people responsible by function. This allows the strategy to be visible to all areas of the organization.

3. Execution

How to put your strategy into action? You need efficient systems and processes that allow you to operate without making mistakes that cost time and money.

If you execute effectively, your margins get bigger and you have more time for yourself because you should not invest it in solving errors and conflicts. One of the most recurrent problems among entrepreneurs is lack of time. We get to work more than 12 hours a day and it is still not enough. If this has happened to you, then you have an execution problem.

4. Cash

Without cash there is simply no more way to keep anything. Perhaps this is something that may be obvious but, if it is so clear, why is it not paid enough attention?

Before resorting to credit or external financing, ask yourself: am I taking sufficient care of my cash? Am I aware of how it moves daily in my organization? Do I know exactly how much I have? Do I know the time it takes to return each penny to my pocket? You need to be a police officer of your cash to avoid capital leaks, you need to streamline your conversion cycles and sub-cycles in your sales, delivery, production and collection, so that it moves faster and reaches you sooner.

There is much that we can make more efficient in SMEs to help them overcome any crisis scenario. I recommend starting with these 4 Decisions that will provide a solid operational structure and, thus, we will be able to avoid reaching a business cemetery where we regret what we could do. Now is the time to act!

Discover how to implement and make the 4 Scaling Up Decisions more efficient in your company with the advice of experts at the Growth Institute.

Find out all the details here:

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